A California Ruling Is More Bad News For Philly Teachers

Being a Philadelphia school district teacher is not an easy job. And this past week it just got harder. Not only because of yesterday’s decision by the School Reform Commission to terminate the district’s agreement with the teachers union and require teachers to now pay in for their health insurance. It’s also because of a ruling in California.

In what will be a devastating blow to California public employee unions, U.S. Bankruptcy Judge Christopher Klein ruled in the Chapter 9 municipal bankruptcy of the City of Stockton that pensions managed by the California Public Employee Retirement System, known as CalPERS, can be cut in bankruptcy “like any other garden variety” unsecured debt. He rejected the unions’ argument that the world’s largest pension fund is an “arm of the state” and that public employee pensions are protected by federal and state laws.

A little background: In 2012, the City of Stockton, California, became the largest city in the U.S. to ever declare bankruptcy after a housing market collapse and years of financial mismanagement. Its largest creditor, with a $147.5 million claim for unfunded pension costs, was and still is CalPERS. Within a year of declaring bankruptcy, “city officials adopted a budget for operating under bankruptcy that included reducing health-care premium payments for its retirees last July and eliminating them entirely a year later.” And now the city wants to cut pensions. And the courts seem to agree. In bankruptcy, everything’s on the table. Even in California, a state arguably known for its liberal judicial system.

Philadelphia’s school system, a public institution like the City of Stockton, is not yet bankrupt. But, it’s close. And it too faces insurmountable healthcare and pension obligations that most experts believe cannot be possibly met without re-negotiation.

Yes, taxes on cigarettes and those evil, dastardly natural gas drillers who are creating our energy independence and employing tens of thousands can help.

Cuts in pay previously made this year to the district’s principals and others in the administration are also very helpful.

Now the teachers must do something to avoid the same fate as Stockton.

“Every single stakeholder has stepped up to help the district close its structural deficit — the principals, our blue-collar workers. Families and children have, too, through the loss of resources, increased class sizes, and lack of materials. It is time for the Philadelphia Federation of Teachers to share in the sacrifice,” SRC Chairman Bill Green said yesterday. Apparently, the SRC unanimously feels the same way.

This predicament is not the teachers’ fault any more than it was the fault of the public workers in Stockton. But this is the place they unfortunately chose to work. Both groups have been receiving pension and healthcare benefits that are unrealistic in today’s economy. Both argue that a deal’s a deal when anyone who runs a business knows that deals often change depending on circumstance. Cities, school systems, and other public institutions that cannot pay their bills have to renegotiate their contracts. Unfortunately, these contracts were created by weaker politicians in the past and today’s leaders, like the officials in Stockton and the members of the SRC (which includes the district’s superintendent, Dr. William Hite, and former teachers’ union members) are forced to make painful, but necessary, decisions. Did I mention that this decision was made unanimously?

Of course, the teachers union can (and will) fight. They can appeal the SRC’s authority to cancel their contract. They can throw their weight behind sympathetic political candidates like Tom Wolf. They can argue that a deal’s a deal and a contract’s a contract. But the winds are not blowing in their direction. The new deal just requires them, like the rest of us, to contribute to their health insurance and takes away the “opt-out” payment made if they choose not to participate in the district’s insurance plan (a benefit employees at all of my clients could only dream of). No payroll or pension cuts are part of this. The deal would “effectively close the funding gap and provide the district with the ability to hire new teachers, counselors and nurses, and secure educational resources that will benefit the students of Philadelphia,” according to Governor Corbett.

Philly teachers, I think you better jump at the offer and move forward. You will need to accept the reality that times are different, and when circumstances change contracts are frequently re-negotiated. The good news is that new teachers, counselors, nurses and resources will, in the long run, make your job better (oh, and provide a better education for our kids). A financially stable school system is in everyone’s best interests. But more importantly you don’t want to take this to the courts. The SRC’s decision was not the nuclear one. Bankruptcy is. And given the recent Stockton ruling, the odds are not in your favor.